Tesaro Inc: Building A Cancer Pipeline
Edison | Feb 22, 2014 11:31PM ET
Building a cancer pipeline
With positive results from two Phase III trials in hand and a third expected, TESARO Inc, (TSRO) should be able to file an NDA for rolapitant in mid-2014 and may gain US approval in H115. The prospects for rolapitant are good, given the management team’s past success in the CINV market. In the meantime, Tesaro’s smart clinical strategy in developing niraparib has positioned this drug well in a competitive PARP inhibitor landscape. Pivotal Phase III data are due in 2015, leading up to a possible approval in 2016. We value Tesaro at $1,851m, suggesting ~50% upside potential in the share price.
Rolapitant data met key primary endpoint…
Tesaro reported positive results of two of the three rolapitant Phase III trials in patients receiving highly emetogenic chemotherapy (HEC) and moderately emetogenic chemotherapy (MEC) treatments, with the third to come out in Q2 this year. Despite missing one of the trial’s secondary endpoints, rolapitant should be approved in H115 in the US, reaching a market worth $1.5bn.
…and management knows the CINV market very well
Rolapitant’s attractive product attributes, including availability of both an oral and IV form (in 2016), long half-life and lack of drug-drug interactions, position it well against its two other competitors. Furthermore, the Tesaro management team’s deep understanding of the CINV market obtained through its successful development and commercialisation of Aloxi (palonosetron) at MGI Pharma should come in handy when rolapitant is launched, an advantage that may be overlooked.
Niraparib sprints ahead
Tesaro’s aggressive clinical strategy has advanced niraparib to the front of seven PARP (poly [ADP-ribose] polymerase) inhibitors in clinical development, with one Phase III trial actively enrolling patients and the second one near dosing of the first patient. Niraparib’s efficacy data, combined with the evolving understanding about genetic mutations and PARP inhibitor efficacy, makes the drug’s Phase III probability of success high, in our opinion.
Valuation: Upside remains
Our rNPV valuation suggests an intrinsic value of $1,851m, or $51.5/basic share (including 3.2m shares recently offered) or $48.7/diluted share. Successful rolapitant launch and positive niraparib Phase III outcomes are the next major value inflection points.
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